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Collusion, Tanking, and the Financial Battles of Baseball

Even if the entire remainder of the free agent class were to sign today for reasonable, acceptable price tags, we will not avoid the coming tumult over collusion allegations, tanking frustration, and a looming CBA fight that could last years.

I tend to think what we’re seeing this offseason is more institutional byproduct than actual collusion. But to whatever extent last year’s new Collective Bargaining Agreement set the stage for this year’s slow free agent period and the self-imposed austerity of teams that otherwise had been allergic to such things, most will probably come around to the idea that many of the issues the game now faces were driven by factors that long preceded the CBA. This, perhaps, was only the tipping point.

Jeff Passan sought out to investigate collusion in the market, but by the time he was finished putting together his thoughts in a lengthy piece at Yahoo, he realized he was writing about something much bigger and much broader. He was writing about how the entire economic system of Major League Baseball might be broken:

A month ago, I started calling people asking about collusion. I wound up finding something much different: a threat to the entire economic model of baseball as we know it. Here is the real story of the frozen free agent market and why it is so important: https://t.co/VKS6iYlBzspic.twitter.com/CLyrcF3WhB

Passan’s read is so very good and important for a myriad of reasons, not the least of which is really hammering home just how poorly the union operated in the last CBA negotiations. Those of us following it closely could feel it at the time, and had our suspicions confirmed the day the CBA was unveiled – it was a clear loser for the players. And time, unfortunately for the players, has borne that out.

That CBA, which created penalties for the luxury tax cap that at least made it plausible that baseball operations would not want to exceed the limit (it is easily the closest the sport has ever come to a salary cap), has also engrained incentives for teams not to compete.* Losing didn’t used to be the way to succeed long-term in baseball, but as front offices become smarter and more homogenized, the draft and international free agency (and trading away assets) have become critically important for success (at the expense of free agency). That means it’s a double-whammy for free agents, as teams not only avoid signing them because they perceive there’s no point, but also because they’d rather focus their financial efforts elsewhere.

Passan wonders if fixing these very foundational issues is going to require a SIGNIFICANT change in the 2021 CBA. Things like free agency after just four years, or a true salary cap that requires 50% of the league’s revenues going to the players. It’s hard to see how the players will be able to grab enough leverage to get such significant changes … without drastic action.

(Photo by Tom Szczerbowski/Getty Images)

A serious problem is that there are no incentives to win 75 games built into the structure of the game right now, not only because of the draft, but also because of long-term TV contracts that pay guaranteed fees over a 15, 20, or 30-year period regardless of how watchable the team is. When TV contracts became one of the primary sources of team revenue, the incentive to keep playing “passably competitive baseball” to put asses in the seats dropped dramatically.

(Note: the Cubs are deep in the weeds figuring out their next TV deal, which might not even be a “TV” deal, since the world is changing so rapidly. When I say that the deal could be critical for the future of the sport, I am not exaggerating. I have developed a concern that, with so much of a team’s revenue tied to its local TV deal, and with players getting a smaller share of the pie, there could be a maelstrom of events in the coming 10 years where discord with the players and local TV deals falling out of fashion cause serious economic disruption of the game. That’s a tale for another day, I suppose. But it’s creeping up in the back of my mind.)

The only real incentive to try to be in the “passably competitive baseball” range is if you will feel the revenue pinch (tough for the league to change that), or if there is more variability in outcomes (as younger players become increasingly important, it feels like that part is happening, so that’s good), or if there are more opportunities for “rewards” for being passably competitive.

Not only would that increase the pool of spots available for free agents, but the attendant restructuring could create extra playoff spots, making it much, much less palatable to tank for a year when you might otherwise be competitive (because the baseline for “competitive” will drop a bit). Something the league and the players should think about.

Of course, right now, it seems almost impossible to get the sides on the same page about anything – see the ongoing pace-of-play drama – let alone something as major as expansion, re-alignment, and playoff changes.

If you want to consider these issues more today, there’s a ton of reading spilling out right now thanks to the slow market:

Craig Calcaterra writes about how things got to this place with respect to the perceived weakness of the union. From his perspective, union chief Tony Clark has worked well with his players – he was one of them and knows the things they care about on a day-to-day basis – but has been ineffective in being forceful on the financial side of things. As much might be self-evident, but I appreciate reading it all laid out thoughtfully and with care.

Nathaniel Grow writes about the lack of leverage the union now has on many of its bargaining points, which will be a problem in 2021 when they try to get back a greater chunk of the revenues. When the league can change pace-of-play rules unilaterally and already got a hard cap on IFA signings, your ability to offer things on those fronts is really limited.

Mike Axisa writes up five ways to get the players more money, including a payroll floor, a set free agency age, restricted free agency, increased amateur spending, and a good old fashioned higher minimum salary.

Mark Normandin writes about the history of collusion in MLB, and how it could be happening again today – even if not in the way you’d imagine owners explicitly talking to each other and their front offices to limit free agent offers.

*I will always point out that the Cubs did not tank in the traditional sense, as they (1) had genuine limitations on payroll tied to the sale of the team, (2) still sought to sign usable players throughout the rebuild (even as they traded many of them at the deadline), and (3) did a whole lot more to reconstruct the organization beyond merely “have a low payroll, rake in cash, and lose games.”

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